Favorite Long-Term Business Loans for 2023
You may require a business loan with a long repayment term if you want to make investments in the long-term expansion of your company. Although some long-term company loans have periods as long as 25, most have terms of three to ten years.
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A long-term loan can help you cover costs up front while paying them back gradually over time, whether you’re aiming to buy equipment, invest in real estate, increase your workforce, or accomplish another company goal.
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Observations for Comparing Long-Term Business Loans
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When looking for the ideal long-term business loan, take into account aspects like payback terms, interest rates, fees, and more. In order to compare long-term company loans, keep in mind the following:
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Choose a payback schedule that fits your goals and budget. If you need a significant length of time to repay your loan, look for a lender who offers a longer payback term. Your monthly payments may become more manageable if you extend your loan, but keep in mind that over time, you may end up paying more in interest.
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To determine which has the lowest interest rate, compare them. You must pay back the principal amount of the loan plus interest when you take out a business loan. Finding a loan with an affordable rate may be aided by comparing your rates with those of many lenders.
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Pay attention to hidden costs. Keep a watch out for origination, administrative, or other fees that can raise the cost of your long-term business loan since they can also increase your borrowing costs.
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Find out the smallest and largest loan amounts that a lender will make. Each lender establishes its own lending restrictions, while some grant customers with strong credit histories or sizable business income larger ceilings. To make sure it fits your demands, ask the lender how much they can lend you.
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How long will it take to receive your loan? When you apply for a loan, some lenders can process your application immediately, while others can take a few weeks to disburse your funds. Lenders who offer prompt loan disbursement should be your first priority if you need a loan right away.
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Specify your eligibility for a loan by reviewing the requirements. If you want to be eligible for a loan, the lender may have requirements such as a minimum credit score, annual income, length of operation, or other factors.
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Consider your options for customer service with the loan. Prior to deciding on a loan if you’ve identified one that provides the services you need, take a look at their customer assistance offerings. Your borrowing experience can be made or broken by the customer service team, so compare your options and read customer testimonials to learn what other borrowers are saying about the lender.
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What Kind of Loans for Businesses Are Considered Long-Term?
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A form of business loan known as a long-term business loan has a lengthy payback schedule, usually ranging from three to ten years. Repayment terms of up to 25 years are available on a few long-term company loans, including some U.S. Small company Administration (SBA) loans.
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Although loan amounts can vary, they are usually greater than what you would see on short-term company loans. Banks, alternative lenders, and the Small company Administration all offer long-term company loans.
These loans can be used for a variety of purposes, including expanding your personnel, buying equipment, financing construction projects, investing in real estate, and paying other costs related to business expansion.
Enterprise Loans: Long-Term vs. Short-Term
While short-term company loans frequently have repayment lengths of three months to three years, long-term business loans typically have repayment periods of three to ten years or more.
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Long-term and short-term company loans have different characteristics, but there are other differences as well. Here are some other methods for differentiating between these two loan types:
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Date for repayment. While a short-term loan may call for weekly or even daily payments, a long-term business loan is typically repaid with monthly installments.
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The interest rate. Although your creditworthiness will have a role in the rate you receive, long-term loans may have cheaper rates than short-term loans.
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Amounts of loans. With a long-term loan, you might be able to borrow up to $6 million, as opposed to the $1,000 maximum for a short-term loan.
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standards for borrowing. For a long-term loan, the lender may have more demanding standards, such as solid credit, extensive business experience, and high annual income. People who are just starting their enterprises can be eligible for short-term loans because they may have more lenient credit standards.
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It’s time to invest. A long-term loan may take longer to process from a lender, especially if it is for a high loan amount, but a short-term loan may have funds accessible within 24 hours.
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Goal of the loan. If you want to grow your business significantly, you may need a long-term loan to finance the renovations, the purchase of machinery, or the hire of staff. On the other hand, a short-term loan could be utilized to overcome a cash flow shortfall, cover emergency costs, or seize a fleeting business opportunity.
Exactly How Do Long-Term Business Loans Operate?
The upfront payment for long-term business loans is often a lump sum that can be applied to operating costs. Every month, you’ll make payments toward the principle balance of the loan as well as any accumulated interest.
Less money will be required each month as your payback period lengthens. You’ll also accrue more interest over the course of a longer period of time and be in debt. The total cost of your loan will rise as you extend the repayment period by more years, even though it may appear cheaper on a month-to-month basis.
Your lender may also impose fees, such as origination, administrative, or late fees, in addition to interest. When a loan is repaid earlier than expected, certain lenders may additionally charge prepayment fees.
Long-Term Business Loans: Different Types
There are numerous financial institutions that provide long-term business loans. You should think about the following loan types.
One: Online loans
Online financial institutions offer business loans, albeit their repayment terms might not be as lengthy as those offered by a bank or credit union.
For instance, terms from certain internet lenders include a maximum of five years. Other than that, others provide smaller loan sums. In contrast to Fundbox, which has a $150,000 maximum loan amount, BlueVine has a $250,000 maximum loan amount.
Positively, whereas a traditional bank can take many weeks, some internet lenders can process your application rapidly, often funding your loan in a few days.
(2) SBA Loans
Competitive interest rates and 25-year repayment terms are available with SBA loans. Loans from the SBA come in a variety of forms and sizes. For instance, SBA 7(a) loans might be as high as $5 million. The maximum amount for an SBA microloan is $50,000, and loan terms can last up to six years.
Loans from banks
Alternative sources of long-term company loans include conventional banks. Rates and conditions vary by institution, but most banks take these factors into account when assessing your loan application: credit, income, profitability, and length of company. To protect themselves against losing money if you don’t make your payments, certain lenders could additionally demand collateral before approving your loan.
Credit Union Loans
Long-term business loans from some credit unions are also available, and their terms and rates are competitive. When deciding whether you qualify for a business loan, credit unions conduct the same analysis of your personal and business finances as banks do. Credit unions, on the other hand, could insist that you join before you can apply for a loan.
Methodology
Based on 16 data points in the areas of loan specifics, cost, eligibility, customer satisfaction, and application process, we evaluated well-known lenders. In accordance with the importance given to each criteria, we selected the top lenders:
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A 35% loan fee
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Specs of the loan: 25%
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Experience with customers: 20%
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Requirements and accessibility: 10%
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Procedure for application: 10%
We also took into account a number of factors within each major category, such as the range of loan amounts that were available, the repayment conditions, and any fees that might be involved. We also considered the lender’s regional reach, minimal credit score restrictions, and experience in the industry. Finally, we looked at the borrower benefits, borrower benefits, and features that make the borrowing process simpler, like mobile apps, online applications, and prequalification alternatives, offered by each supplier.
Depending on how successfully a lender completed each requirement, we gave partial points where necessary.
See our Loans Rating & Review Methodology for more information about how Forbes Advisor ranks lenders and our editorial process.